ASSISTANT COMMISSIONER OF INCOME TAX, DELHI, DELHI V. M/S SAMPARK LAMINATORS PRIVATE LIMITED, DELHI

ITA 5461/DEL/2025

AI Insights

The case involves multiple appeals by both the assessee, Sampark Laminators Pvt. Ltd., and the revenue against the orders of the Learned Commissioner of Income Tax (Appeals)-27, New Delhi, concerning various assessment years from 2019-20 to 2023-24. The primary issues revolved around the legality of the assessment orders, the validity of notices issued under section 143(2), and the additions made for unexplained investments and income. The Tribunal consolidated the appeals due to common issues and interrelated facts, focusing on the lead case for A.Y. 2023-24. The Tribunal's decision highlighted the discrepancies in the Assessing Officer's approach, particularly the reliance on extrapolation without substantial evidence, leading to the dismissal of the revenue's appeals and partial relief to the assessee.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 844056 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2026
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2020-2021
• Appeal Filed On: 02-09-2025
• Other Referred Cases: CIT Vs Paradise Holidays, Maruti Suzuki India Ltd, Zohra The Emporium
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONIKA SINGH
• Assessee Lawyers: AMIT GOEL
• Keywords: Business income; Unexplained expenditure; Unexplained investment; Document seized; Documents seized; Search and seizure
• Section: 142(1); 132; 69; 69C

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’: NEW DELHI BEFORE SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER AND SHRI VIMAL KUMAR, JUDICIAL MEMBER ITA No.6111 /Del./2025, A.Y. 2019-20 ITA No.6112 /Del./2025, A.Y. 2020-21 ITA No.6113 /Del./2025, A.Y. 2022-23 ITA No.6114 /Del./2025, A.Y. 2023-24 Sampark Laminators Pvt. Ltd. C 1 /203, Rohini, Sector 5 S.O. North West Delhi, India PAN: AAMCS7911H Vs. DCIT, Central Circle - 19, New Delhi (Appellant) (Respondent) ITA No.6917 /Del./2025, A.Y. 2023-24 DCIT, Central Circle - 19, New Delhi Vs. Sampark Laminators Pvt Ltd. C 1 /203, Rohini, Sector 5 S.O. North West Delhi, India PAN: AAMCS7911H (Appellant) (Respondent) Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 2 ITA No.5460 /Del./2025, A.Y. 2019-20 ITA No.5461 /Del./2025, A.Y. 2020-21 ITA No.5462 /Del./2025, A.Y. 2021-22 ITA No.5463 /Del./2025, A.Y. 2022-23 ACIT, Room No. 267, 2nd Floor, E-2, Jhandewalan Extn. ARA Centre, New Delhi Vs. Sampark Laminators Pvt Ltd. C 1 /203, Rohini, Sector 5 S.O. North West Delhi, India PAN: AAMCS7911H (Appellant) (Respondent) Assessee by Shri Amit Goel, CA Sh. Pranav Yadav, Advocate Sh. Mohit Jain, CA Revenue by Ms. Monika Singh, CIT-DR Date of Hearing 22/01/2026 Date of Pronouncement 20 /03/2026 ORDER PER S. RIFAUR RAHMAN, AM These nine appeals have been filed by the Assessee and Revenue against the orders of Learned Commissioner of Income Tax (Appeals)-27, New Delhi [“Ld. CIT(A)”, for short], dated 27.06.2025, 25.07.2025 & 01.09.2025 for Assessment Years 2019-20 to 2023-24 respectively. Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 3 2. All these appeals are interconnected having common issues. All these appeals are heard together and disposed off by this common order. We are taking ITA No.6114/Del/2025 & 6917/Del/2025 for A.Y. 2023-24 as a lead case. 3. Since all appeals having same issues, Here the grounds of ITA No. 6114. Del.2025 is being reproduced: “1. On the facts and circumstances of the case and in law, the assessment order passed by the assessing officer is bad-in-law without jurisdiction and barred in limitation and CIT(A) erred in not holding so. 2. On the facts and circumstances of the case and in law, the notice u/s 143(2) issued in this case is bad-in-law and without jurisdiction and, therefore, the said notice alongwith assessment order passed on the foundation of such notice are liable to be squashed. 3. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the addition made by the Ld. Assessing Officer to the extent of Rs. 1,03,59,180/- on account of alleged unexplained Investment u/s 69 of the Act. 4. On the facts and circumstances of the case and in law, the CIT(A) erred in enhancing the addition made by the Ld. Assessing Officer of Rs. 20,64,403/- u/s 69 of the Act. 5. On the facts and circumstances of the case and in law, the CIT(A) erred in enhancing the addition made by the Ld. Assessing Officer of Rs. 23,87,730/-on account of business income. 6. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the addition made by the Ld. Assessing Officer to the extent of Rs. 31,32,760/- on account of alleged unexplained Investment u/s 69 of the Act. Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 4 7. On the facts and circumstances of the case and in law, the CIT(A) erred in enhancing the addition made by the Ld. Assessing Officer of Rs. 3,98,156/- on account of business income. 8. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the addition made by the Ld. Assessing Officer of Rs. 5,69,728/- on account of alleged unexplained money u/s 69A of the Act. 9. On the facts and circumstances of the case and in law, the order of CIT(A) is contrary to the provisions of section 251(2) of the Act and, therefore, the addition of Rs. 23,87,730/-, Rs. 20,64,403/- and Rs. 3,98,156/- made by him are erroneous and liable to be deleted. 10. On the facts and circumstances of the case and in law, the approval taken by the assessing officer from Addl. CIT before passing the assessment order is contrary to the provisions of the Act.” 3.1 The revenue has raised following grounds of appeal: “1. Whether on the facts and circumstances of the case, Ld. CIT(A) erred in deleting/partly deleting the additions made by the Assessing Officer without properly appreciating the facts of the case, evidentiary value of seized materials and also not appreciating that statement recorded u/s 132(4) hold evidentiary value and can be the sole basis of addition, especially when not retracted or rebutted with documentary evidence? 2. Whether on the facts and circumstances of the case, Ld. CIT(A) has erred in restricting the addition made by the AO of Rs. 26,06,06,841/- on account of excess stock of raw materials under Section 69 of the Act, without properly appreciating the fact that the entire computation by the AO was based on unverified and unreliable data extracted from \"Busy Software\", which was not used for maintenance of statutory books of accounts? Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 5 3. Whether on the facts and circumstances of the case, Ld. CIT(A) has further erred in confirming partial addition based on selective acceptance of Tally data without completely discarding the erroneous Busy software workings which formed the entire basis of the AO's computation? 4. Whether on the facts and circumstances of the case, on facts and in law, the Ld. CIT(A) erred in restricting the addition of Rs. 15,30,55,503/- made by the Assessing Officer under section 69 of the Income Tax Act, 1961 on account of unexplained investment in excess stock of finished goods found during the course of search and seizure proceedings? 5. Whether on the facts and circumstances of the case, Ld. CIT(A) erred in placing reliance on unauthenticated Tally data produced for the first time during appellate proceedings, which was not produced at the time of search or assessment and which was neither supported by corroborative documentary evidence nor reconciled with seized material? 6. Whether on the facts and circumstances of the case, Ld. CIT(A) erred in substituting the addition made under section 69 for unexplained investment with a mere estimated addition of 8% of alleged unaccounted sales, without appreciating that the nature of addition under section 69 pertains to investment and not business income or profit from unaccounted turnover? 7. Whether On the facts and circumstances of the case, Ld. CIT(A) has erred in deleting the addition of Rs. 2,21,02,428/- made by the Assessing Officer u/s 69C of the Income Tax Act, 1961, on account of unexplained cash expenditure incurred towards salary/wages, without properly appreciating the facts of the case and the documentary evidence and statement recorded on oath brought on record by the Assessing Officer? Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 6 8. Whether On the facts and circumstances of the case, Ld. CIT(A) has grossly erred in holding that the addition was made merely on the basis of extrapolation, whereas the Assessing Officer had relied upon specific incriminating documents recovered during search and corroborated statements recorded under oath, clearly evidencing the payment of unaccounted cash salaries by the assessee? 9. (a) facts. The order of Ld. CIT (A) is erroneous and not tenable in law and on (b) The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.” 4. The brief facts of the case are that the Assessee filed its return of income for the assessment year 2023–24 on 20.10.2023, declaring a loss of Rs. 3,88,58,164/-. A search and seizure action was initiated under section 132 of the Income Tax Act, 1961 (in short, “the Act”) on 03.08.2022. The case of the assessee was centralized to Central Circle-19, vide order passed under section 127 of the Act. 5. The search action was conducted at the business premises located at Sonipat, Haryana. The assessee has three manufacturing units at Sonipat, Haryana. During the search action, various documents, physical as well as digital data, were found and seized. From the seized documents, the Assessing Officer observed that the assessee has involved in payment of salary to off-roll workers for different months pertaining to different units. The Assessing Officer has reproduced a total 5 sheets of ‘off-roll salary’ for the month of December 2021, containing details of 118 Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 7 workers along with their respective details and units to which they belonged. The same has been reproduced in the assessment order as Exhibit-1 at pages 3 to 7 and Exhibits 2 to 3 at pages 8 to 12 of the assessment order. The above documents were corroborated with the statement of Shri Yashpal who has acknowledged the pen drives and the distribution of off-roll wages/salaries to various workers for the purpose of saving ESI and PF, and for distribution of cash to various workers, collection of the relevant cash from Shri Amit Hoota and Mandeep Kaushik. The Assessing Officer has also reproduced handwritten receipts of cash notes during various months at pages 16 to 22 of the assessment order. Based on the above documents and evidences on record, the Assessing Officer issued a notice under section 142(1) of the Act to the assessee, to explain why the above payment of salary/wages should not be treated as unexplained and undisclosed expenditure and not to add to the income of the assessee. 5.1 In response, the assessee has submitted that it has incurred the above expenditure for manufacturing of bag packing material during the COVID-19 pandemic period and also during the expansion of its units and it has acknowledged that the assessee has incurred the above said expenditure, also explained the necessity of engaging such workers to carry out small activities such as loading and shifting of material from one factory to another factories. After considering the detailed submissions of the assessee, the Assessing Officer rejected the same and Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 8 observed that the assessee had paid salary/wages to its employees and off-roll workers as tabulated below: From the above table, he calculated the average monthly payment at Rs.55,25,607/-. A further notice was issued to the assessee to explain the same and the assessee has explained the same explanation what was given in the earlier occasion and this time assessee has objected for adopting the extrapolation based on material found during the search for the remaining period. After considering the submissions, the Assessing Officer rejected the same and proceeded to make an addition under section 69C read with section 115BBE of the Act to the extent of Rs. 2,21,02,428/-. Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 9 5.2 During the course of the search, the Assessing Officer observed that production-related activities were carried out in all three factories situated in Sonipat, Haryana but the raw materials for all factories are purchased and delivered at one factory (Unit-1) only. All the raw materials required for production related activities for rest of the two units are transferred from Unit-1. Subsequent to the production, the finished goods from the other two units are again transferred back to Unit-1, from which the final sale takes placed from unit-1 only. He observed that all purchases and sales of the assessee are taken placed from unit -1 only. During the search proceedings, a statement of Shri Mandeep Kaushik was recorded on oath under section 132(4) of the Act on 03.08.2022 and based on the explanation recorded from him, the Assessing Officer drawn up the process chart depicting inter-units material movements as under: Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 10 5.3 Based on the above process of material movement and manufacturing, he observed that the books of account is maintained in Tally software, wherein all purchases along with quantity and date were recorded. It also maintained item-wise sales details of finished goods, the semi-finished and raw material, however, they are not maintaining any opening stock, closing stock and the consumption of raw materials in Tally software. He observed that another set of books was found in a separate software “Busy software”. In above said Busy software, he observed that the assessee maintains only inter-unit transfers of raw materials, semi-finished goods and finished goods. Thus, all the purchases of raw materials and sales of finished goods are maintained in Tally software. 5.4 After considering the statement of Sh. Mandeep Kaushik, he observed that quantity of opening and closing finished goods are maintained in RG-1 register which is prepared to record the manufactured units/quantity on monthly basis. After considering the detailed statements, the Assessing Officer has summarized the process as under: a) opening and closing balance are taken from audit report b) purchases are recorded in Tally software c) Consumption are recorded and taken from Busy Software Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 11 d) sales are recorded in Tally software as well as reconciled from RG registered 5.5 After considering the above, the Assessing officer prepared a comparison chart by taking opening stock from audit report as on 01.04.2020 in the form of quantity and taken the purchases from Tally software from financial year 2020-21 to financial year 2022-23 (01.04.2022 to 31.08.2022) and extracted the consumption of material sent to unit 2 and unit 3 on the basis of Busy Software from financial year 2020-21 to financial year 2022-23 (upto 31.08.2022) and considered sales as per Tally software from FY 2020-21 to 2022-23 (upto 31.08.2022). Based on the above data, he determined raw material wise closing stock. The relevant chart is extracted at page 47 of the assessment order. By comparing the above closing stock, the Assessing Officer came up with the excess/deficit of raw material, for the sake of clarity, the same is reproduced below: Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 12 6. The same was sent to the assessee and the assessee was asked to explain. In response, the assessee filed a detailed submission objecting to adoption of above method. After considering the same, the Assessing Officer rejected the same and he came to the conclusion, after conducting a physical verification of stock with the involvement of the assessee and he determined the excess of raw material. After physical verification to the extent of Rs. 26,06,06,841/- with the above determination of excess stock, again assessee was asked to explain the same. In response, the assessee submitted as under: “We are hereby show caused as to why Rs. 26,06,06,841/- on account of difference in Raw Material and Rs. 15,30,55,503/- on account of difference in Finished goods should not be added to total income. In this regard, at the outset, we would like to state that proposed addition is totally erroneous and high-pitched. The addition proposed is based upon conjecture, surmises, presumption & assumption only. There is no difference in stock as per books of accounts and physically found. The proposed addition/ inference is drawn on the basis of following calculation of stock vis-à-vis physical verification of stock as on the date of search: Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 13 Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 14 In respect of the above, at the outset, it is submitted that the so-called working of stock is not correct and not reliable due to reasons mentioned below: - a) The methodology adopted by the search team to arrive at the closing stock as on the date of search is erroneous as your good office has relied upon certain data recovered from \"Busy Software\". In this regard, it is humbly submitted that the data maintained in the Busy Software was mainly used for GST purpose as in the GST Act, there is requirement of making Delivery Challans in case goods are moved from One unit to another unit, however, it has no impact from Income Tax Point of View. Further, we have requested your good office to provide us the Busy data however till date no such data has been provided by you. b) The company is a manufacturing industry in which various raw materials such as Foil, Paper, Adhesive, Film, Ink, solvent and UV has been used to produce/manufacture laminated sheets, but while doing the above calculation, the search team has not taken into account the material loss (wastage) and evaporation loss which is very common in production activity. The calculation has been done in the manner that the assessee company has engaged in Trading Activity rather than Manufacturing Activity. Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 15 For Example, there is evaporation loss of approx. 35% to 60% in adhesive depending upon the type of adhesive such water-based adhesive, solvent based, heat seal coating etc. Similarly, there is 100% evaporation loss in Solvents and about 75-80% evaporation loss in printing ink. This evaporation loss has not been taken into consideration in the working of closing stock made by the search team. There is difference of opening stock of paper as per Audit Report (01.04.2020) and as per Books of accounts. The opening stock of paper as per Books of accounts is 4,84,693.30 kgs, thereby there is apparent difference of 6981.30Kgs. Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 16 7. After considering the above submissions, the Assessing Officer rejected the same and proceeded to make the addition with regard to raw material difference, the Assessing officer has observed as under: “11.4. In view of the above discussion, the assessee has failed to furnish satisfactory reply. Thus, assessee is unable to or unwilling to satisfactorily explain the given excess stock amounting to Rs. 26,06,06,841/-. Hence, excess stock amounting to Rs. 26,06,06,841/- found during the search action remained unexplained. The same is unexplained investment as per the meaning of Section 69 of the Act. The relevant part of the section 69 is reproduced below: \"Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year.\" 8. With regard to finished goods, he has observed as under: 12.4. In view of the above discussion, the assessee has failed to furnish satisfactory reply. Thus, assessee is unable to or unwilling to satisfactorily explain the given excess stock amounting to Rs. 15,30,55,503/-. Hence, excess stock amounting to Rs. 15,30,55,503/- found during the search action remained unexplained. The same is unexplained investment as per the meaning of Section 69 of the Act. The relevant part of the section 69 is reproduced below: \"Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 17 the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year.\" 12.5. In view of the above discussion an amount of Rs. 15,30,55,503/- is added to the total income of the assessee during the year under consideration u/s 69 r.w.s 115BBE of the Income Tax Act, 1961. 9. Further, during the search proceedings, it was found that there is a cash difference between physical cash and the cash as per books they were found an excess unexplained cash to the extent of Rs. 5,69,728/-, the same was added as u/s 69A of the Act. 10. Aggrieved with the above order, the assessee preferred an appeal before the ld. CIT(A)-27, new Delhi. 11. Before, Ld CIT(A), the assessee filed a detailed submissions, the same are reproduced at Page No. 3 to Page No. 54 of the impugned order. 12. After considering the detailed submissions of the assessee, Ld. CIT(A) analyzed the raw material stock individually and found that the method adopted by the Assessing Officer is not proper and he analyzed the same himself and found that in certain cases that stocks are excess/deficit, wherever he found the stocks are deficit, he proposed estimated GP @ 8% on the deficit stock, and accordingly the addition made by the Assessing Officer on raw material to the extent of Rs. 26,06,06,841/- was reduced as per the below chart: Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 18 Items Addition made by AO Decision of CIT(A) Foil 4,04,12,290 Addition Restricted to Rs. 81,24,246/- u/s 69 of the Act Paper 15,03,34,152 Addition Restricted to Rs. 22,34,934/- u/s 69 of the Act Semi-finished goods 6,98,60,398 Addition of Rs. 6,98,60,398/- Semi-finished goods Enhancement on account of Addition of Rs. 11,41,964/- under the head business income Adhesive … Enhancement on account of addition of Rs. 6,69,246/- made u/s 69 of the Act Film … Enhancement on account addition of Rs. 13,95,157 made u/s 69 of the Act. Ink …. Enhancement on account addition of 6,81,152/- Solvent ….. Enhancement on account Addition of Rs. 3,38,680/- under the head business income UV ... Enhancement on account addition of Rs. 2,25,934 made under the head business income Misc. ….. …… 13. With regard to excess stock found in finished goods by the Assessing Officer which are as under: Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 19 14. After considering the detailed submission of the assessee, he analysed the stock item wise and he reduced the same by observing as under: Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 20 Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 21 15. Accordingly, he sustained the addition of Rs. 35,30,916/- instead of Rs. 15,30,55,503/-. 16. Further, the assessee has raised additional ground against the addition of Rs. 2,21,02,428/- on account of alleged unexplained expenditure u/s 69C of the act. Above additional ground was accepted for adjudication after considering the detailed submissions and case laws on this issue, Ld. CIT(A) allowed the additional ground by observing as under: “7.10. On careful perusal of the above judgments, the ratio of the said judgments are squarely applicable in this case. In the instant case, the Ld. Assessing Officer has made the addition on the basis of extrapolation without bringing any material evidence in support of addition for April, 2022 to July 2022. Therefore, no extrapolation can be made in respect of entire financial year since no such evidence had either been found during the search nor brought on record during the assessment proceeding 7.11. Further, the Ld. AO to legitimately apply extrapolation methodology to the entire fiscal year and subsequent and previous years, sufficient evidence must exist to establish that the Appellant has consistently engaged in unrecorded cash transactions and consequently earned profits beyond those disclosed in tax returns. On careful perusal of the facts of the case, I am of the considered opinion that neither the search team nor the AO uncovered compelling evidence supporting the fact that the Appellant been regularly involved in unaccounted cash transactions and earning undisclosed income. Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 22 7.12. Therefore, after careful consideration of the above narrated facts, circumstances of the case and the submissions of the Appellant and Assessment Order, respectfully following the ratio of the judgments of the Hon'ble High Courts and ITAT including jurisdictional Delhi High Court and Hon'ble ITATS, addition of Rs.2,21,02,428/- is deleted. Therefore, the ground of appeal is allowed.” 17. Aggrieved with the above order, both revenue as well as the assessee in appeal. 18. At the time of hearing, Ld. AR submitted that the assessee does not prefer to press grounds nos. 1 to 5, 7, 8,9 and 10, accordingly, the above said grounds are dismissed as not pressed. 19. With regard to ground nos. 3, 4 and 6 of the appeal and department’s grounds no. 2,4 and 6, Ld. AR submitted as under: “Search and seizure operations was carried out in the case of the assessee on 03/08/2022. The assessee company is engaged in the business of manufacturing and production of laminated printed packaging material. The assessee company has 3 manufacturing units at Sonipat as given in para 6 of the assessment order. The production related activities take place from all the units. However, all the raw materials for all the factories are purchased and delivered at one unit (Unit – I) and sale of finished goods also takes places from Unit – I only. All the raw material required for production related activities for rest of the two units are sent from Unit – 1. Subsequent to the production, the finished goods from other two units are again transferred to Unit – I (Refer para no. 9 of the assessment order). Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 23 The addition of alleged unexplained stock made by the AO is totally erroneous and arbitrary. The assessee company is maintaining its books of accounts in tally software. All purchases and sales are duly recorded in tally software on real-time basis. The GST Software was maintained only for GST compliance in respect of interunit transfer of goods from one unit to another for generating delivery challan which is mandatory for movement of goods under GST Laws. The busy software has no relevance so far as the maintenance of financial books of accounts, preparation of financial statements and income tax returns are concerned. In para 9.1.2 of the assessment order, this factual position has been accepted. The AO has grossly erred in making arbitrary, irrational and baseless working of stock. The financial statements are prepared based upon the regular books of accounts maintained in tally software. Even the ITR are filed on the basis of tally software. Thus the stock as per books is the stock as shown in books of accounts, ITR and Audited Financial Statements. The AO has acted in self contrary manner. On the one hand the AO is accepting the profit as well as stock shown in the books of accounts (tally software) and ITR and, while calculating the stock as per books, ha has ignored the stock as per books/ ITR and made his own arbitrary working. In respect of the above, it is humbly submitted that the AO has grossly erred in making the addition. The addition made by the AO is totally arbitrary and baseless. At the time of search itself, it was duly explained that tally data contains the record of purchases, sales and stock and no separate stock register was maintained. It is humbly submitted that since all the purchases, sales and stock were maintained in tally, there was no requirement of maintaining any other stock register. There is no dispute that the financial books of accounts, audited financials and ITRs are all Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 24 based upon the tally software. There is no dispute by the AO that all the purchases and sales are duly recorded in tally software and there is no unaccounted purchase. There is also no dispute by the AO that “Busy Software” was solely for inter transfer/ movement of goods from one unit to another for generating delivery challans as required under GST Laws. Reference in this regard is invited to following paras in the assessment order 9. During the course of search action, it was found that production related activities at M/s Sampark Laminators Private Limited takes place from all the three factories (Units) situated in Sonipat Haryana, but the raw material for all the factories are purchased and delivered at one factory (Unit 1) and the sale of finished goods also takes place from Unit 1 only. All the raw material required for production related activities for rest of the two units are sent from Unit 1. Subsequent to the production, the finished goods from other two units are again transferred to Unit 1. The final sale takes place from Unit 1 only. In nutshell, all the purchases and sales of M/s Sampark Laminators Private Limited take place from Unit 1 only. -------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------- ----------- 9.1.2. During the search proceedings, it has been observed that the books of account of the assessee company is maintained in Tally software, wherein, it records all the purchases along with the quantity and date. The entity is also maintaining item wise sale details of finished, semi finished and raw material, however, they are not maintaining any opening stock or closing stock and the consumption of raw material in tally software. Further, another set of books was found in busy software. As per books of account maintained in Busy software, it was found that in this books of account, only inter-unit transfer of raw material, semi finished goods and finished goods of M/s Sampark are entered in Tally software, whereas, Inter-unit transfers of finished goods is maintained. Therefore, all the purchases of Raw material and sales of raw material, semi finished and finished goods are entered in Busy software. From the above, it is evident that the AO has himself accepted the factual position that all the purchases and sales are entered in tally software. It has also been accepted that books of accounts is maintained in tally software wherein it records all the purchases with quantity and date. It has also been admitted that the entity is also maintaining item wise details of finished , semi finished and raw material. The remarks made that the opening and closing stock and computation in tally software Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 25 is totally erroneous. The complete data of opening stock, purchases, consumption, manufacturing and closing stock was duly submitted to AO and as reproduced on page no. 72 to 76 of the assessment order is reproduced as under: Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 26 Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 27 The AO has not rebutted the above submission/ details. It is also pertinent to point that the accounts of the company are duly audited under the Companies Act as well as under the Income Tax Act by the Independent Auditor and the Auditor have duly certified that the company is maintaining proper books of accounts including proper stock records. The Hon’ble Judicial Delhi High Court in the case of CIT Vs Paradise Holidays (2010) 325 ITR 13 (Delhi) held as under: 6. The Assessing Officer has not pointed out any specific defect or discrepancy in the Account Books maintained by the assessee. Admittedly, the assessee had been maintaining regular Books of Accounts, which were duly audited by an independent Chartered Accountant. As noted by CIT(A), the financial results were fully supported by the assessee with vouchers and the Books of Account were complete and correct in all respects. The accounts which are regularly maintained in the course of business and are duly audited, free from any qualification by the auditors, should normally be taken as correct unless there are adequate reasons to indicate that they are incorrect or unreliable. The onus is upon the Revenue to show that either the Books of Accounts maintained by the assessee were incorrect or incomplete or method of accounting adopted by him was such that true profits of the assessee cannot be deduced therefrom. Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 28 The AO has not pointed out any single evidence of nay out of books purchases or sales. The sales/ purchases of the assessee are also matching with GST returns. The books of accounts (maintained in tally software) have been duly accepted by the AO. The AO has done arbitrary and baseless working which has resulted into absurd figures. The appellant fallacy in the working is evident from the fact that in many items, the AO has calculated negative stock as per books which is not possible. The CIT(A) after detailed analysis of factual position has rightly held that stock as per the books of accounts as maintained in tally software and as declared in the ITR/ Audited Financial Statements has to be considered instead of arbitrary and baseless working of the AO. Accordingly, he has rightly deleted the high pitched, arbitrary and erroneous addition made by the AO by considering and analyzing the each and every item of stock. Accordingly, there is no infirmity in the action of the AO in deleting the addition made by the AO. There is no merit in the contention of the AO that tally records were submitted during the appellate proceeding. From page no. 41 and 42 of the assessment order, it is evident that at the time of search itself the stock records of tally were provided to the search party. Moreover, during the assessment proceedings also the complete details of purchases, sales, stocks, consumption, production as per tally were provided to the AO which have been reproduced by the AO himself in the assessment order. It is also worthwhile that the reference by the AO that statement of some of the employees at the time of search is totally out of context and there is nothing in the statement to suggest any unexplained investments in stock. There is neither any confession/ admission in the statement of any unexplained stock nor there is any Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 29 instance provided by the AO of any unaccounted purchases or sales. In the absence of any unaccounted purchases, the allegation of unexplained stock is totally misconceived. There is apparent fallacies in the working/ methodology adopted by the AO. The same is evident from the fact that if as per the working/ methodology of the AO, the stock is calculated as at the year end i.e. 31.03.2021 and 31.03.2022, it will be evident that so called difference in stock will be prior to 31.03.2021 and not for the year under consideration i.e. A.Y. 2023-24. The apparent fallacies in the working of the AO is also evident from the fact that the AO has calculated so called difference, some excess and some deficit. However, he has taken only the item of “excess” and ignored the “deficit”. If the AO had considered the items of “deficit” also (alongwith both excess and deficit working is arbitrary and baseless), there would not have ben any excess/ unexplained stock as alleged by AO. The assessment for A.Y. 2021-22 & A.Y. 2022-23 were completed by the assessing officer himself and no adverse was drawn in respect of search. The assessment for A.Y. 2021-22 was even completed earlier. Thus the assessment for A.Y. 2021-22 was done earlier twice and no adverse inference was drawn. In view of the above, the addition made by AO is erroneous and CIT(A) has rightly deleted the same. Submitted Please” 20. On the other hand, Ld. DR brought to our notice detailed findings of the Assessing Officer and heavily relied on the findings of the Assessing Officer, and he objected to the relief granted by the Ld. CIT(A). Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 30 21. Considered the rival submission and material placed on record. We observed that the assessee maintains its stock centered around the unit 1, which is its main hub for its business, and it does control the activities more effectively. The process is, it maintains complete stock at unit 1 and distributes the raw material to the other two units for manufacturing purposes and it gets back the final products after manufacturing. The process of sending raw material to other units and the return of final products and manufacturing or damaged raw materials are maintained or recorded thru the separate software called “Busy Software”. This is internal control of movement of stock from Unit 1 to other units. We observed that the overall movement of stock is controlled through the tally. It will be demonstrated as below: Movement of stock In Tally Stock movement from unit 1 to units 2 and 3 Opening stock with unit 2and 3 (including raw material and WIP) Return of finished goods Closing raw material and stock in process at unit 2 and 3 (By using the Busy SoŌware) Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 31 The assessee maintains the complete movement of stock thru tally in the “unit 1” and all the consumptions are recorded in the tally itself. The stock consumption as recorded or determined by the tally software must be reconciled with the information available in the Busy Software, if there is difference in the raw material consumption are to be reconciled and it will be either process loss or material damages during production. In our considered view, the lower authorities had not understood the total process of manufacturing. The assessee is engaged in the business of manufacturing and production of laminated printed packaging material. The method adopted by the authorities below to compare the material consumption of raw material wise. This is certainly wrong method of verification. The raw materials are input for the manufacturing of the laminated printed packaging materials like, Foil, paper, adhesive etc. You cannot compare these items like the final products. These materials are utilized to manufacture the final goods on the basis of their standard formula of utilization in the process. It may be based on relevant consumption, obviously the paper will tally with the final product with the standard wastage because of cutting or compression. The other products are utilized based on the standard process. As discussed in the above chart, which is only to demonstrate that the overall consumption must be derived from the tally, since the assessee maintains the complete purchases and sales in the tally, the process is like below: Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 32 Opening stock (from the audited balance sheet) + total purchases (as per the tally data) – consumption of Unit 1 and consumption from the Busy software (utilized by the unit 2 and 3) = Closing stock The consumption of unit 2 and 3 is maintained in the Busy software, it must be determined as under: Opening stock of raw materials with the units (including WIP) + material sent from Unit 1 (= total material sent to units 2 and 3) – material utilized in the manufacturing of finished goods - standard wastage = closing stock of raw materials with the units. In case some difference in the stock in the units 2 and 3 are concerned, it will be treated as process loss or abnormal loss. All the above transactions are monitored through Busy Software. We noticed that the lower authorities had not considered the dynamics in the manufacturing process and its standard losses. Merely calculated the raw material difference without understanding the process, will end up with the wrong conclusion. In our view, the tax authorities could have utilized the services of experts, ie., auditors in this line of business. We further noticed that the tax auditor must certify the raw material consumption and stock movements as part of the standard reporting in form 3CD. The final consumption must be derived from the tally and not to mix up with the other software maintained by the assessee for its internal purposes. In our considered Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 33 view, the whole exercise adopted by the lower authorities is basically wrong, they have adopted differently for excess stock and shortage, they proceeded to charge percentage of GP on the shortage as if it is undisclosed stock. Therefore, we are inclined to delete the additions proposed by the AO as well as CIT(A). In the result, grounds raised by the assessee are allowed and grounds raised by the revenue are dismissed. 22. With regard to the department’s appeal ground no. 7, the Ld. DR brought to our notice the detailed findings of the Assessing Officer and submitted that, during the search proceedings, there are several incriminating materials in the form of physical as well as digital data were found and confronted to the assessee. Based on the material found during the search, it was observed that the assessee was paying salary/ wages to off-roll workers and overtime to the existing workers in cash without bringing on record. He further submitted that the above findings clearly show the assessee is regularly incurring the above expenditure. Therefore, he supported the additions proposed by the Assessing Officer after due analysis of the material found during the search and heavily relied on the findings of the Assessing Officer. 23. On the other hand, Ld. AR submitted as under: Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 34 “Search and seizure operation was carried out in the case of the assessee on 03.08.2022. As per the assessment order (para 8 and 9), evidence was found during the search that the assessee company has made following salary payments in cash which were not recorded in the books of accounts: Month Amount December 2021 33,27,571 June 2018 50,97,634 May 2018 63,12,250 October 2018 73,64,973 Total 2,21,02,428 Further there were evidence of payment of Rs. 2898438/- in September and October 2019. 2. The AO made the addition of above salary in the respective year. Beside this the AO took average of above salary of 4 months i.e. Rs. 55,25,607/- and made the addition of salary @ Rs. 55,25,607/- per month for the entire period from 01.04.2018 to 31.07.2022 except for the 4 months listed above for which the addition was made of the amount mentioned against them. 3. For the A.Y. 2019-20 to A.Y. 2022-23, the only issue involved in the appeal is with regard to alleged unaccounted salary payment. The assessee is in appeal against the addition confirmed by CIT(A). The revenue is in appeal against the addition deleted by CIT(A). The details are as under: AY Addition made by AO Addition confirmed by CIT- (A) Addition deleted by CIT(A) 2019-20 6,88,77,781 1,87,74,857 5,01,02,924 2020-21 6,92,05,722 28,98,438 6,63,07,284 2021-22 6,63,07,284 0 6,63,07,284 Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 35 2022-23 6,63,07,284 33,27,571 6,29,79,284 Total 27,06,98,071 2,50,00,866 24,56,96,776 4. The CIT(A) as per detailed analysis and discussion in para 5.1 to 5.9 of his order has confirmed the addition to the extent to which evidence were found and deleted the remaining addition. Further the CIT(A) has confirmed addition of Rs. 28,98,438/- for A.Y. 2020-21. 5. With regard to addition deleted by CIT(A), it is submitted that there is no infirmity in the order passed by CIT(A). The CIT(A) has considered the issue in a detailed manner and has rightly deleted the addition. 6. With regard to addition of alleged unaccounted salary confirmed by CIT(A) it is submitted that the lower authorities have erred in applying provisions of section 69C of the Act. It is humbly submitted that the only source of income of the appellant is business and it has no unexplained source of income. Therefore, the addition confirmed by CIT(A) should be as normal business income. Reliance is placed on following case laws: 1. Hiralal Vijawat Versus ACIT/DCIT, Central Circle, Kota - 2025 (9) TMI 1487 - ITAT Jaipur 2. ITO, Ward – 1, Jalna Versus Nishatbegum Syed Baba Rasool Patel Patel Show Company - 2025 (6) TMI 1988 - ITAT Pune 3. Kolhapur Timber And Furniture Mart Versus ACIT, Central Circle, Kolhapur. - 2025 (3) TMI 1430 - ITAT Pune 4. Late Harilal Mavjibhai Patel, Versus ACIT, Central Circle, Kolhapur - 2025 (4) TMI 1662 - ITAT Pune 5. M/s. Lucky Furniture Versus ACIT, Central Circle, Kolhapur. - 2025 (5) TMI 1315 - ITAT Pune 6. Park Plaza, Park Paradise Versus The PCIT, Vadodara-1, Vadodara - 2025 (4) TMI 855 - ITAT Ahmedabad 7. Pr. Commissioner of Income Tax, Alwar Versus Bajargan Traders C/o. Kalani & Co. - 2017 (11) TMI 388 - Rajasthan High Court 8. Pranati Buildcon Versus The ACIT/DCIT, Central Circle, Kota - 2025 (11) TMI 633 - ITAT Jaipur Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 36 9. Praveen Kumar G Jain Versus Asst. Commissioner of Income Tax, Central Circle -3 (2), Chennai - 2025 (7) TMI 1664 - ITAT Chennai 10. Shri Rajiv Kumar, Prop. M/s Sunil Sweets, Punjab Versus The ITO, Ward, Sirhind. - 2025 (12) TMI 26 - ITAT Chandigarh 11. The Pr. Commissioner of Income Tax (Central) Versus Deccan Jewellera (P) Ltd. - 2021 (9) TMI 424 - Andhra Pradesh High Court Submitted Please” 24. Considered the rival submission and the material placed on record. We observed that the assessee was found with the incriminating material which showed that it was paying wages to workers who are not part of regular payroll during the month of May 2018, June 2018, October 2018 and December 2021. Based on the above information, the AO came to the conclusion that the assessee was utilizing the workers regularly and incurring the expenses during the whole time, hence he proceeded to determine the average monthly payment to the off roll workers and applied the same to the period from FY 2018-19 to FY2022-23. Accordingly, he proceeded to make the additions in all the years under consideration, particularly in the AY 2023-24 to the extent of Rs. 221,02,428/-. We noticed that the AO had extrapolated the payment of wages to the Off role workers on the basis of average monthly payment based on incriminating material found during the search. The issue is, can the AO adopt such method when there is material found for the other period. It was submitted before us that the assessee had incurred above said expenses on the Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 37 basis of requirement particularly during Corona Period and during expansion of production. The AO had absolute material indicating assessee had employed the off- role employees during the four months, which was accepted by the assessee. There is no material with the AO to come to conclusion that the assessee employed such off-roll employees in the other years or other months. There is no justification for the AO to make addition based on extrapolation. The Hon’ble Delhi High Court held that the AO cannot adopt such method, particularly in the cases of Maruti Suzuki India Ltd (2025) 171 Taxmann.com 729 and in the case of Zohra The Emporium (372 ITR 381). After considering the detailed findings of Ld CIT(A), we observed that the AO has made the addition by adopting the method of extrapolation without bringing any material evidence in support of making such additions during the period April 2021 to July 2021. Hence, we are inclined not to disturb the detailed findings of Ld CIT(A) in this regard. In the result, ground raised by the revenue is accordingly dismissed. 25. In the result, appeal filed by the revenue is dismissed and the appeal filed by the assessee is partly allowed as discussed above. 26. The other appeals filed by the revenue in AY 2019-20 to AY 2022-23 where the issue raised are exactly similar to the ground no 7 raised in the AY 2023-24, since the issue involved is exactly similar in the other assessment years, the findings in Ground No 7 are applicable mutandis mutatis to the grounds raised in AY 2019-20 Printed from counselvise.com ITA No. 6111 to 6114/Del/2025 ITA No. 5460 to 5463/Del/2025 ITA No. 6917/Del/2025 38 to AY 2022-23. Accordingly, the appeals filed by the revenue in AY 2019-20 to AY 2022-23 are dismissed. 27. The appeals filed by the assessee in AY 2019-20, AY 2020-21 and AY 2022-23, at the time of hearing, Ld. AR has not pressed the legal grounds and other issues. Accordingly, all the above appeals are also dismissed. 28. In the result, appeals filed by the revenue are dismissed and appeal filed by the assessee in AY 2023-24 are partly allowed and other appeals filed by the assessee are dismissed. Order pronounced in the open court on this 20th March, 2026. Sd/- Sd/- (VIMAL KUMAR) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 20th .03.2026 Binita, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals)-XXVI, New Delhi. 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "